EFFECT OF PERCEIVED BEHAVIORAL FACTORS ON INVESTORS' INVESTMENT DECISIONS IN NEPSE

Abstract

This study investigates the factors influencing investment decisions in Nepal's primary (IPO) and secondary markets, with a focus on heuristic behavior, prospect attitude, market status, and herding behavior. Utilizing descriptive and causal research designs, data were collected from a sample of 310 investors in Kathmandu District through structured questionnaires administered electronically and via personal visits. Responses were measured using a 5-point Likert scale. The data were analyzed using inferential statistical tools and Cronbach's alpha test, employing SPSS version 25.0 and MS-Excel. The findings reveal that prospect attitude and market status significantly influence investment decisions in both primary and secondary markets. Investors with a positive outlook towards risk and who carefully evaluate market conditions tend to make more informed investment choices. While heuristic and herding behaviors are present, their impact on investment decisions is less pronounced, indicating that rational assessments play a crucial role in shaping investment strategies. These results underscore the importance of rational decision-making processes based on prospect attitudes and market evaluations. The study aligns with behavioral finance theories that highlight the influence of psychological biases and rational choices on investment behaviors. By providing empirical evidence within the context of Nepal's financial markets, the study highlights the nuanced interplay between cognitive biases and market fundamentals. Practical implications suggest the need for tailored investor education programs to enhance risk management skills and deepen market dynamics understanding. Effective communication strategies that offer transparent and reliable market information can mitigate heuristic biases and promote informed investment decisions. Regulatory authorities can leverage these insights to improve market transparency and investor protection measures, fostering a more conducive investment environment.